Tsenin talks up Centro recap

The prospects for a recapitalisation of Centro’s Australian business are picking up as the real estate and credit markets improve.

Centro Properties Group
chief executive
Robert Tsenin
has given the strongest indication yet that Centro’s shopping centre empire – in particular its Australian assets – may not be sold in a giant trade sale.

Mr Tsenin’s comments came as he reported on the interim results for listed spin-off Centro Retail Trust, which he also heads.

He agreed it was “fair" to conclude that the potential for a recapitalisation had improved since Centro first launched the $13 billion sale process late last year.

“The reason for that (is) the markets – whether they be property markets and financing markets – have improved, which is very fortuitous," he said.

“It has given us that range of options ... that say 12 months ago we just didn’t have."

As cautious as they were, Mr Tsenin’s remarks add weight to market expectations that Centro is likely to sell its US assets while retaining its Australian portfolio.

Final bids on Centro’s $US9.5 billion portfolio are due today from a shortlist including private equity player Blackstone, a Morgan Stanley-led consortium and NRDC.

Related Quotes

Company Profile

Market sources say initial bids for the US assets may have been as high as 7 per cent above book value, although it was expected final bids may come in a little lower.

But there has been no shortlist yet for bids on the Australian assets, leaving potential bidders including Lend Lease and Colonial First State Asset Management frustrated.

Adding to their doubts was Centro’s abrupt decision last week to abort a looming sale of its syndicates business to
Cromwell Property Group
.

Cromwell informed the market the deal had fallen over because Centro’s new lenders, namely the group of about 55 hedge funds who own most of its headstock debt, had vetoed the syndicates management sale.

Mr Tsenin said yesterday the Australian assets were “pretty well-known" and there were “no surprises" in the bids on them.

“In terms of the US, the markets have clearly been improving. We’ve been pleased by the proposals we’ve received. Where all that lands, that’s something we are working our way through now."

Mr Tsenin refused to be drawn on why the sale process was advancing in the US while any Australia sale appears to have stalled.

“I wouldn’t read anything more into it other than we are evaluating the options which are not simply restricted to sale of any assets. They are being evaluated with a broader range of options in mind."

The Centro chief also noted that Centro Retail had “close to $1 billion of positive net equity", which gave it options that the listed parent – which reported $2 billion in negative net equity at its annual result last year – “just doesn’t have".

Centro Retail shares hit a 12-month high of 36¢ yesterday before closing at 35.5¢.

Mr Tsenin said the best way to maximise the value of Centro’s assets - given the complicated cross-ownership - would be to aggregate them in a “100 per cent ownership vehicle". "There is some financial logic to doing that. I’m not saying that is where we heading to because we have to evaluate all alternatives."